I have to say I find this decision (published in the latest DCI) very puzzling for two reasons.
1. Paragraph 13 of ISBP states ‘Drafts … must be dated’. Yet the ‘expert’ panel decided that the fact that the draft in question was not dated was not a discrepancy.
The panel seems to justify its decision on the basis that ‘A draft drawn on a bank must be considered an instrument solely requested by the issuing bank … i.e. an instrument that has not been called for by the applicant and that is therefore of no concern to it’.
Therefore, if I understand the panel correctly, it is saying no reliance can be put on what ISBP actually plainly says.
2. The panel justifies its decision regarding the second discrepancy on the basis of ‘different fonts (type faces) in printing the L/C and the invoice’. However, it seems to have totally ignored the far more fundamental point that the UCP (including international standard banking practice) does not require invoices even to bear an address (for either applicant or beneficiary) let alone for any address to be as quoted in the Credit. The decision would seem to suggest that had the beneficiary address quoted in the invoice been different from that quoted in the credit the panel would have -quite wrongly- regarded the invoice as discrepant.
Are others as equally puzzled by this decision as me?
DOCDEX DECISION 260
DOCDEX DECISION 260
it seems you don't like puzzles.i love them.
begining with the last i'd say an invoice not stating address of bnf/applicant isn't discrepant (isbp645-60&61).
re draft i think for sure it must be dated. it is a transferable, negotiable financial instrument.it is not a piece of paper for issuing bank use only. (depending on the form was issued,endorsed).
i think till monday you will have some various answers to your questions.
bogdan.
begining with the last i'd say an invoice not stating address of bnf/applicant isn't discrepant (isbp645-60&61).
re draft i think for sure it must be dated. it is a transferable, negotiable financial instrument.it is not a piece of paper for issuing bank use only. (depending on the form was issued,endorsed).
i think till monday you will have some various answers to your questions.
bogdan.
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RolandLeupi
- Posts: 115
- Joined: Fri Apr 05, 2019 5:26 pm
DOCDEX DECISION 260
Independently of it's function, a draft needs to be dated. It is a fundamental element and under our law the draft has to be dated and it is compulsory.
As far as the invoice regards, ISBP60&61 refer to telex or fax numbers forming part of the address only but not about the rest.
Roland
As far as the invoice regards, ISBP60&61 refer to telex or fax numbers forming part of the address only but not about the rest.
Roland
DOCDEX DECISION 260
dear roland,
in my country draft must be dated too. in fact, i'd like to know the country(ies) where must not be dated.
re invoice, whould you reject an invoice not showing bnf's address ? isbp645 also state under 60 and 61 "an invoice must appear on its face to have been issued by the bnf named in the credit"and "an invoice must be made out in the name of the applicant".the issue is the names and not addresses.as long as invoice shows the names of bnf and applicant,as defined under l/c, i think there is no reason for rejection. furthermore, what is the meaning of "etc.,forming part of the address" under art.60 and 61 ?
bogdan.
in my country draft must be dated too. in fact, i'd like to know the country(ies) where must not be dated.
re invoice, whould you reject an invoice not showing bnf's address ? isbp645 also state under 60 and 61 "an invoice must appear on its face to have been issued by the bnf named in the credit"and "an invoice must be made out in the name of the applicant".the issue is the names and not addresses.as long as invoice shows the names of bnf and applicant,as defined under l/c, i think there is no reason for rejection. furthermore, what is the meaning of "etc.,forming part of the address" under art.60 and 61 ?
bogdan.
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KimChristensen
- Posts: 404
- Joined: Fri Apr 05, 2019 5:21 pm
DOCDEX DECISION 260
Dear Jeremy,
This is really a nice one. Must say that I am really torn here. On one hand the ISBP has at least 15 paragraphs (13 plus 45 through 58) that all deal with drafts. On the other the ICC have stated in Opinion TA.373 that:
Quote
“..the requirement for the presentation of a draft is usually at the insistence / request of the issuing bank and not the applicant. Therefore, a discrepancy involving a draft drawn on the issuing bank is of no concern of the applicant nor one on which they should arbitrate as to whether to accept or not..”
Unquote
However – I think that your basic concern is absolutely right: Since it is a rather clear provision of the ISBP that drafts must be dated, then it seems far out to take a different stand here.
I think that the reason falls from the above mentioned Opinion – and others – which I totally agree with – so actually the problem is (as I see it) that on this point the ISBP tries to “guide”, and it may not be a question of “discrepancy” or “no discrepancy”. This is of course a problem, as the ISBP is used as a guide to determine whether or not documents comply – and it will be impossible for LC users to guess which provisions are merely “guiding” and which can be used to refuse documents.
So to me this is an ISBP problem, which I would hope to be solved when the ISBP is revised to match the UCP 600 (??).
The other one is interesting as well. Again I see your point, but do understand the reason that the panel of experts has chosen this wording. The “addresses” have proven to be highly controversial. As far as I understand the contents of ISBP paragraph 60 and 61 shows the extent of which the banking community could agree. Roland sort of indicates this in his posting: Does the fact the address is not mention in Paragraph 60 and 61 while telex, fax etc. is mean that the address must be there? You may argue both ways, but the fact is that there is no standard banking practice for this. Which also is why the UCP 600 tries to solve it.
Therefore by saying that it is impossible to tell a “1 - one” from “the letter I”, is to me a intelligent way to get around this.
Again I will give you, that the absence of a statement to the fact that even if the LC had clearly stated the “letter I” while the invoice showed “1 – one” may lead to such refusals, which I think would be totally wrong. In this case there is no doubt in my mind that the invoice is issued by the right party.
(again – this will hopefully be solved by the UCP 600).
That was a long one. Sorry for that – but thanks for the challenge.
Best regards
Kim
[edited 8/11/2006 7:40:48 AM]
This is really a nice one. Must say that I am really torn here. On one hand the ISBP has at least 15 paragraphs (13 plus 45 through 58) that all deal with drafts. On the other the ICC have stated in Opinion TA.373 that:
Quote
“..the requirement for the presentation of a draft is usually at the insistence / request of the issuing bank and not the applicant. Therefore, a discrepancy involving a draft drawn on the issuing bank is of no concern of the applicant nor one on which they should arbitrate as to whether to accept or not..”
Unquote
However – I think that your basic concern is absolutely right: Since it is a rather clear provision of the ISBP that drafts must be dated, then it seems far out to take a different stand here.
I think that the reason falls from the above mentioned Opinion – and others – which I totally agree with – so actually the problem is (as I see it) that on this point the ISBP tries to “guide”, and it may not be a question of “discrepancy” or “no discrepancy”. This is of course a problem, as the ISBP is used as a guide to determine whether or not documents comply – and it will be impossible for LC users to guess which provisions are merely “guiding” and which can be used to refuse documents.
So to me this is an ISBP problem, which I would hope to be solved when the ISBP is revised to match the UCP 600 (??).
The other one is interesting as well. Again I see your point, but do understand the reason that the panel of experts has chosen this wording. The “addresses” have proven to be highly controversial. As far as I understand the contents of ISBP paragraph 60 and 61 shows the extent of which the banking community could agree. Roland sort of indicates this in his posting: Does the fact the address is not mention in Paragraph 60 and 61 while telex, fax etc. is mean that the address must be there? You may argue both ways, but the fact is that there is no standard banking practice for this. Which also is why the UCP 600 tries to solve it.
Therefore by saying that it is impossible to tell a “1 - one” from “the letter I”, is to me a intelligent way to get around this.
Again I will give you, that the absence of a statement to the fact that even if the LC had clearly stated the “letter I” while the invoice showed “1 – one” may lead to such refusals, which I think would be totally wrong. In this case there is no doubt in my mind that the invoice is issued by the right party.
(again – this will hopefully be solved by the UCP 600).
That was a long one. Sorry for that – but thanks for the challenge.
Best regards
Kim
[edited 8/11/2006 7:40:48 AM]
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AbdulkaderBazara
- Posts: 256
- Joined: Fri Apr 05, 2019 5:15 pm
DOCDEX DECISION 260
Let’s look at it from a fair business practice; what, in this case, could possibly go wrong because the draft was undated. Unless someone comes up with a reasonable answer, I would accept the decision despite the acknowledged nature of drafts.
Best regards
Best regards
DOCDEX DECISION 260
Thanks all for expressing your views.
My personal views are:
On the bill of exchange / draft matter, firstly I would mention under the Bill of Exchange Act 1882 ‘(4) A bill is not invalid by reason— (a) That it is not dated;’. However, I would add that I do not consider the legal position ought to be relevant to the question of the facial compliance of a draft.
To me, the problem with this Docdex decision is that it introduces uncertainty in to the examination of documents, as now one cannot be certain the contents of ISBP will be followed by ICC organisations. Whether or not a draft drawn on a bank is -as a question of fact- an instrument solely requested by the issuing bank etc. should not have affected in any way the panel’s decision. What should have affected the panel’s decision is the need to uphold the reliability of the ISBP and given what ISBP says this should have been followed to the letter, irrespective of the apparent (in)justice of the outcome.
I have no doubt this problem will not be solved under UCP600, yet it could so easily be. The UCP ought to have a detailed article on the question of drafts that provides that (unless the D/C states otherwise):
1. where a D/C calls for a draft one does not have to be presented and if one is unless it is drawn for the wrong amount or the wrong period it may not be refused (e.g. if it is drawn on the wrong party, not endorsed, not signed, it is not possible from the draft alone to determine the due date etc it may not be refused).
2. if a usance draft is not presented or is presented but not drawn (except with respect to amount and period) or endorsed correctly, the appropriate party is to / may (as appropriate) give a deferred payment undertaking.
This is because - as a general rule- the contents of a draft (except amount and period) are in fact of no importance to the applicant or the drawee.
As for the invoice address, this was an opportunity for the panel to put down a clear marker that addresses simply do not matter (unless expressly required by the D/C). (The suggestion that in some countries there can be more than one business with the same name is not a factor that needs to be taken into account. This is because it is a highly remote possibility that a business with the same name as the beneficiary will (A) become aware of the D/C and (B) present documents under it. Avoiding reasons for refusing documents -thereby keeping operational costs down- is far more important.) However, the panel seems to have totally failed to take this opportunity and instead given the impression of subscribing to the highly damaging (to D/C operations) view that addresses do matter when it comes to facial compliance.
Overall this decision seem to have increased operational risk by creating -in the case of drafts- or reinforcing- in the case of invoices- uncertainty.
[edited 8/14/2006 11:14:11 AM]
My personal views are:
On the bill of exchange / draft matter, firstly I would mention under the Bill of Exchange Act 1882 ‘(4) A bill is not invalid by reason— (a) That it is not dated;’. However, I would add that I do not consider the legal position ought to be relevant to the question of the facial compliance of a draft.
To me, the problem with this Docdex decision is that it introduces uncertainty in to the examination of documents, as now one cannot be certain the contents of ISBP will be followed by ICC organisations. Whether or not a draft drawn on a bank is -as a question of fact- an instrument solely requested by the issuing bank etc. should not have affected in any way the panel’s decision. What should have affected the panel’s decision is the need to uphold the reliability of the ISBP and given what ISBP says this should have been followed to the letter, irrespective of the apparent (in)justice of the outcome.
I have no doubt this problem will not be solved under UCP600, yet it could so easily be. The UCP ought to have a detailed article on the question of drafts that provides that (unless the D/C states otherwise):
1. where a D/C calls for a draft one does not have to be presented and if one is unless it is drawn for the wrong amount or the wrong period it may not be refused (e.g. if it is drawn on the wrong party, not endorsed, not signed, it is not possible from the draft alone to determine the due date etc it may not be refused).
2. if a usance draft is not presented or is presented but not drawn (except with respect to amount and period) or endorsed correctly, the appropriate party is to / may (as appropriate) give a deferred payment undertaking.
This is because - as a general rule- the contents of a draft (except amount and period) are in fact of no importance to the applicant or the drawee.
As for the invoice address, this was an opportunity for the panel to put down a clear marker that addresses simply do not matter (unless expressly required by the D/C). (The suggestion that in some countries there can be more than one business with the same name is not a factor that needs to be taken into account. This is because it is a highly remote possibility that a business with the same name as the beneficiary will (A) become aware of the D/C and (B) present documents under it. Avoiding reasons for refusing documents -thereby keeping operational costs down- is far more important.) However, the panel seems to have totally failed to take this opportunity and instead given the impression of subscribing to the highly damaging (to D/C operations) view that addresses do matter when it comes to facial compliance.
Overall this decision seem to have increased operational risk by creating -in the case of drafts- or reinforcing- in the case of invoices- uncertainty.
[edited 8/14/2006 11:14:11 AM]